Monday, March 14, 2011

Japan Tsunami: Nikkei Index plummets

Japanese stocks tumbled Monday and the central bank pumped a record amount of cash in a bid to soothe money markets shaken by Japan's biggest ever earthquake, a devastating tsunami and a nuclear emergency.

Major producers' stocks such as Sony and Toyota tumbled as power shortages prompted blackouts and factories remained closed, hurting production.

The Bank of Japan (BoJ) said it would pump a record 15 trillion yen ($184 billion) to help stabilise the short term-money market, making good on its pledge Sunday that it would unleash "massive" funds following the quake.

An additional 3 trillion yen will be deployed Wednesday. The BoJ will double a five trillion yen asset purchase scheme to buffer the economy from Japan's strongest ever quake, and left its key rate left at between zero and 0.1 percent.

But the move provided little relief for unnerved traders, with another explosion at Tokyo Electric Power's (TEPCO) Fukushima Number One nuclear plant helping push the index lower as economists eyed the impact on Japan's growth.

"Shares will be dragged down with Japan's March GDP figures expected to be sharply lower on a slump in economic activity, delays in distribution of goods on power cuts and loss of human lives," Shoji Hirakawa of UBS said.

Automakers Toyota, Nissan and Honda have announced the suspension of production in Japan. At one point Toyota -- shutting production until at least Wednesday -- and Nissan slumped more than 10 percent.

TEPCO slumped 23.57 percent to 1,621 yen, following an explosion Monday in the building around the number three reactor at the troubled Fukushima plant.

Authorities have announced plans for scheduled rolling power cuts in areas served by TEPCO to make up for the loss of power from crippled nuclear plants.

Toshiba, which manufactures nuclear reactors, fell by its 16 percent daily limit to 411 yen. Sony, which has also shuttered plants, dived 9.12 percent to 2,550.

The yen briefly touched a four-month high before easing against the dollar on the massive liquidity injection. It surged to 80.60 against the greenback, the highest since November 9, and hovered around 82 after the fresh explosion at Fukushima as engineers battle to avoid a meltdown.

The government expects a "considerable" economic impact from the huge earthquake and devastating tsunami that plunged the nation into what Prime Minister Naoto Kan called its worst crisis since the Second World War.

The priority of the central bank is to ensure financial institutions in disaster-hit regions do not run out of funds. Over the weekend it provided them with 55 billion yen to ease the pressure before Monday's fresh fund move.

Monday's move was the BoJ's first since May, when European sovereign-debt fears pushed up the yen steeply and weighed on Tokyo shares, when it injected same-day funds to boost confidence.

Economists say it is still too early to assess the cost of the destruction from the record 8.9-magnitude quake and the 10-metre wall of water that laid waste to swathes of the northeastern coast and triggered an atomic emergency.

The official death toll is expected to rise substantially to more than 10,000.